Recently, my sister posted on Facebook about starting a Couch to 5K program. I commented that I had recently been on the opposite 5K to Couch program and had a lot of success with that, but should probably switch back to the Couch to 5K program now. Truly, Americans need a financial couch to 5k program as much as they need the version intended to improve their physical health. Obesity levels are at 36.5% right now, but the equivalent financial statistics of Americans are even worse.
Studies from the Federal Reserve System show that nearly half of adults (44%) say that they couldn’t cover a $400 emergency expense or would cover it by selling something or borrowing.
So if your savings is currently limited more or less to the loose change in your couch, it’s time to get serious about immensely improving your financial situation.
Related Post: Change Your Financial Situation, Change Your Life
What Could You Do With $5,000?
I recognize that $1,000 is a pretty standard, basic amount to save up for a basic emergency fund. We are going well beyond that here. It doesn’t take a lot for that thousand bucks to be completely gone. But $5,000? That’s enough to really be able to feel financially secure, even with a couple of setbacks along the way.
Just think for a minute about the possibilities with a savings account of $5,000. You could:
- Have enough to pay for a reliable older car in cash if yours breaks down.
- Likely pay your deductible on a high deductible health plan, and possibly even pay your maximum out-of-pocket amount without going into medical debt (currently 39.3% of those with employer-sponsored health insurance have a HDHP and the average deductible is $4,300).
- Replace a major central system in your home such as a new furnace or air conditioning system (the average cost to replace a furnace is around $4,000 and an air conditioning system is slightly over $5,000).
- Cover 1-2 months of bare minimum expenses in the event of unexpected employment.
Think of the fear and stress you will avoid. Just think of the peace of mind that would have come in the past if you had savings to cover some of your unexpected bumps in life!
Related Post: How Money Can Eliminate Fear and Stress In Your Life
How Do You Start?
Well, I probably didn’t really have to convince you that you wanted $5k in your bank account right? Of course, you do.
And if a walk of a thousand miles begins with just a single step, then a journey to 5,000 bucks begins with just a single dollar.
That’s how you start. Just take one dollar and put it in your savings account (or jar or under your mattress, whatever!). You just started your couch to 5K journey.
You don’t want these funds to get mixed back in with your regular budget, so you’ll want to make sure these funds are kept completely separate. I suggest that you open a separate savings account that isn’t linked to your checking account. Online savings accounts (such as Ally or CapitalOne360) offer a little bit higher interest and it’s also beneficial not to be able to access the funds quite as conveniently.
Download the master Couch to $5K guide, which includes the following steps as well as a printable to track your progress by subscribing to the blog here.
STEP 1: CREATING A BUDGET
Now the real work begins. It’s going to start with creating a plan to be able to achieve the $5,000 within a year or less.
Yes, it will include setting up a budget if you don’t have one already. Call it a spending plan instead if you would rather, but this is an essential part of the savings plan. You have to know how much you are currently spending so that you know how much you will be able to cut back, at least until you’ve reached your goal.
To reach $5K in a year or less (I’ve got 12-month and 9-month options, but you can totally create your own!), it is probably best to start small and grow your savings target each month. Both of the options I’ve suggested start small and increase the amount needed to save each month.
By increasing your income and cutting your expenses both, you’ll be able to make a plan to that will help you become better off financially far beyond the $5k.
STEP 2: CUTTING EXPENSES
It may be beneficial to check out some recommended budget percentages in order to identify some budget items that may be good targets to reduce (such as groceries, eating out or entertainment). You can find that in the same format as the budget from above here (makes it so quick and easy!).
I suggest considering the following items to cut first:
- Cut cable ($50+/month)
- Switch to a different cell phone provider and cut data usage ($40-50/month)
- Install a programmable thermostat (costs about $50, but will save more than that within the year)
- Shop around for auto, homeowner’s and other insurance quotes ($10-20/month)
- Do spending freezes on or just focus on reducing specific categories such as entertainment or eating out ($50-100/month)
You should be able to get some quick wins that will benefit all future months to get you started. For example, if you are able to cut $150 from your regular budget by eliminating cable, switching cell phone carriers and reducing your eating out, you’ll save $1,800 just from that in a year! There are some additional ideas on the printable as well.
Don’t forget to transfer this savings to your account each of these months!
STEP 3: INCREASING YOUR INCOME
You can only cut so many expenses before you need to focus on increasing your income as well.
There are so many ways to make a little extra income in today’s digital world. Some examples include:
- Take online surveys ($20+/month)
- Volunteer for some extra hours or shifts at work ($100+/month)
- Take on side jobs such as dog walking, house sitting, Uber driving etc. ($100+/month)
- Search for unclaimed money
- Look up credit cards with cash rewards ($500+ if spending requirements are met, usually within 3 months)
With just a little bit of research and a fair amount of work, it isn’t too difficult to make a couple hundred bucks extra a month that you can put toward your $5k goal. Just don’t forget to deposit this extra money in your separate account.
STEP 4: SELLING THINGS YOU NO LONGER NEED
Lastly, consider selling things that you no longer need. If you have a storage unit, use this year to get rid of things that you haven’t used lately and eventually you’ll be able to save that cost each month as well!
Consider selling the following:
- Electronics (such as old phones, etc.)
- Baby clothing items
Consignment stores are a great option for those that don’t want to personally list and meet people about the sale items. You could also plan a garage sale and publicize it.
The great thing about the financial version of couch to 5K is that unlike with physical fitness where you constantly have to keep it up, you can keep this 5K (and go back to sitting on the couch for a while). And just like when you improve your physical health and feel so much better, having some money in savings is going to eliminate so much stress in your life.
The key to success is a good plan. If the 12-month or 9-month savings plans don’t work for you, make your own plan! Even a 24-month plan to $5K would be amazing progress.
Sure, if something happens it will deplete your $5K. Hopefully, you’ll love how great it feels to have that extra cash cushion by then and it will motivate you to bump it back up!
You can do it!